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Coping With Uncertainty

Posted On: 8/26/2010

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This summer, financial and business experts latched onto a common mantra to explain why U.S. companies aren't hiring, aren't investing and aren't growing -- even though many leading companies are back in the black -- and despite the fact that some firms are sitting on mountains of cash.

The explanation, experts said, is "uncertainty." Exactly what is this "uncertainty" all about? The answer is a very long list.

American businesses can't be sure what the cost impact of the new national healthcare program will be. They don't know how much they'll be paying in taxes on capital gains. They don't know what fees they'll be paying for carbon pollution (read: energy use). They don't know how big the U.S. federal deficit will grow, or how long it will last.

U.S. business owners don't know whether to expect inflation, deflation or stagflation. They don't know what next year's interest rates will be. They don't know if consumer confidence -- that all-important driver -- will suddenly plummet or skyrocket, triggering spending or hoarding ... nor if that change will be motivated by sound thinking, "irrational exuberance" or wild-eyed panic.

Music and games operators are used to dealing with uncertainty. They have lived with it all their lives.

Operators don't know which locations will go out of business tomorrow, or which desperate competitor may suddenly decide to offer "crazy" commission splits.

Operators don't know which new machines, brands or technologies will sizzle, and which will fizzle.

Operators don't know if their city, county or state officials will wake up tomorrow and suddenly decide to tax or regulate an entire class of machines out of existence ... regulate videogames depicting violence off of the market ... ban fun centers as dens of iniquity ... or slam redemption games as "kiddie gambling."

Operators don't know which trade association or exposition may be here today or gone tomorrow.

As a matter of fact, operators don't know which locations may be flooded, hit by a hurricane or tornado, or have a roof collapse (with or without an earthquake).

Operators have many ways of coping with uncertainty. But coping with something is not the same as resolving it. Coping means learning to live with it -- even though the result is not ideal.

Perhaps the top coping mechanism for operators is a commonsense reliance on past experience, sometimes called conventional wisdom. To outsiders, this reliance often looks like excessive caution, especially if you are a manufacturer or distributor trying to persuade operators to buy new machines.

But reliance on the tried and true works most of the time. Operators have their mantras, too: Stick to the staples (jukeboxes, pool, countertops, you know the list). Work like heck to provide great service. And remember that long-term ROI is the name of the game.

Another way operators cope with uncertainty is contracts. True, even the best contract won't prevent an unscrupulous location owner from putting your machines out on the sidewalk and claiming you breached clause 17, paragraph A -- when you both know perfectly well it's not true.

But a contract does provide some protection. The value of that protection can be objectively measured in dollars and cents, too. Just look at the sale price of a route with location contracts compared to the price of one without them. The spread can be 25% or more.

Insurance is another sound operator coping mechanism. The Amusement and Music Operators Association works with Mass Marketing Insurance Consultants, which offers discounted employee insurance programs for operators. Firms like Sterling & Sterling offer insurance for machines and businesses in this industry.

National and state trade associations are great ways to cope with uncertainty. Members share information and support of all kinds. When nasty legislative surprises spring up, there is no better way to respond than through an association that provides strength in numbers.

The AMOA Guide to Developing a Disaster Management plan is another tool for coping with uncertainty that no operator should overlook. Check it out: It's free and available at

Trade media can also help hedge against uncertainty. The operators, distributors and manufacturers who share their time to participate in interviews and write columns provide essential advice and insights that can profit anybody who reads them.

One of the most effective coping mechanisms operators can have for dealing with uncertainty is perhaps the simplest: expect it. Change is normal. Change is both constant and unpredictable. The sooner we accept this fact, the better we can respond when change happens.